The Moral Minimum Wage: A Flawed Concept

An argument that if the wage differential between countries were significantly reduced, third world factories would not be competitive, and many laborers would lose the factory jobs that have improved their standard of living.

“Recognizing wage standards higher than the local minimum wage, in fact, harms workers. Indeed, creating manufacturing jobs in low-wage countries improves the standard of living of workers. For example, the investment of multinational corporations facilitated a 55% increase in Indonesian wages from 1990 to 1996 (Varley 20). The factory jobs created in export industries offer workers valuable income opportunities, which is why so many third world laborers desire such jobs. Developing nations, however, must be able to offer lower wages to compensate for their lower productivity, lack of infrastructure, and other undesirable business conditions. Indeed, 80% of wage differentials can be explained by productivity differentials (Varley 48). If the wage differential were significantly reduced, third world factories would not be competitive, and many laborers would lose the factory jobs that have improved their standard of living.”